Research › Search › Judgment

Kerala High Court · body

2003 DIGILAW 526 (KER)

Cochin Refineries Ltd. v. Commissioner of Customs

2003-08-18

G.SIVARAJAN, KURIAN JOSEPH

body2003
Judgment :- These three references are made by the Customs, Excise and Gold (Control) Appellate Tribunal, (presently Customs, Excise, Service Tax Appellate Tribunal) Chennai under Sec. 130(1) of the Customs Act, 1962 (for short ‘the Act)’ at the instance of M/s. Cochin Refineries’ Ltd., Ambalamugal. The following four questions of law have been referred for decision by this Court. (1) Whether the Hon’ble Tribunal was right in law and on facts in holding that the incidence of customs duty arises as soon as the goods arrive in the territorial waters of India and that therefore, the first available measurement of the quantity and on Board is the ullage Report which would determine the actual quantity imported? (2) Whether the Hon’ble Tribunal was right in law and on facts in holding that the principles applicable to Sec. 116 of the Customs Act would ipso facto apply to Sec. 12 of the Customs Act, 1962 in so far as quantification of duty is concerned? (3) Whether the Hon’ble Tribunal was right in law and on facts in holding that for the purpose of Sec. 12 of the Customs Act. 1962, quantification of duty should be based on the ullage survey report of the ship’s tanks and not on the basis of the quantity determined by shore tank measurement, which represents the actual quantity received by the importer. (4) Whether the determination of quantity based on shore tank measurement is not more accurate method when compared to a determination of quantity based on the ullage survey conducted on board the vessel, for the purpose of quantification of duty under Sec. 12 of the Customs Act, 1962?” 2. The brief facts necessary for decision of the said questions are as follows: The applicant M/s. Cochin Refineries Ltd. is a regular importer of petroleum crude products in the form of liquid bulk cargo. The quantity of petroleum crude products so imported was being assesed by shore tank dip measurement of the quantity of the product that was received in its tank in the Refinery and pipelines. In the year 1996 the department unilaterally decided to effect a change in the manner of assessment as regards the quantity of the imported goods on the basis of a public notice No. 125/93 which was not being enforced till then. In the year 1996 the department unilaterally decided to effect a change in the manner of assessment as regards the quantity of the imported goods on the basis of a public notice No. 125/93 which was not being enforced till then. The public notice contemplates conducting of a ullage survey on board the vessel before and after the discharge of the cargo and to treat the quantity determined by the ullage survey report as being the quantity discharged by the vessel. This figure is taken by the department as denoting the quantity of goods received by the importer for the purpose of assessment under the Customs Act. The applicant on receipt of Annexure B notice sent a reply (Annexure C) objecting to the said method. The Assistant Commissioner of Customs after affording a personal hearing to the applicant rejected the objection and copleted the assessment based on public notice No. 125/93. Being aggrieved by the said order the applicant preferred an appeal before the Commissioner of Customs (Appeals) who by his order dated 23.12.1996 (Annexure E) dismissed the said appeal. A further appeal filed before the Central Excise and Gold (Control) Appellate Tribunal was also dismissed as per order dated 24.11.1998 (Annexure F). Thereafter the applicant filed reference application before the C.E.G.A.T. and the CEGAT by its order dated 10.11.1999 has referred the questions in paragraph 1 above. The Tribunal has noted that the Full Bench decision of the Bombay High Court relied on by them in the appellate order was overruled by the Supreme Court in Apar Pvt. Ltd.’s Case. 3. Sri. Jayasankar Nambiar, Learned counsel appearing for the applicant submitted that even after the issuance of public notice No. 125/93 and upto 1996 the assessing authority under the Customs Act has been adopting the dip measurement in the shore tanks of the refinery as the measure of import of crude oil and that the public notice No. 125/93 was issued by the Commissioner of Customs, Cochin solely on the basis of the decision of the Bombay High court in Shaw Wallace & Co. Ltd. v. Assistant Collector of Customs and others (1986) 25 ELT 948. Ltd. v. Assistant Collector of Customs and others (1986) 25 ELT 948. The counsel further submits that the Bombay High Court has rendered the said decision only in the matter of deciding the liability of the master/agent of the vessel under Sec. 116 of the Customs Act, 1962 and that there is no justification for applying the same for determining the liability of the importers under the Customs Act. The counsel further submits that the Supreme Court in Union of India v. Apar Pvt. Ltd. (1999) 112 ELT 3 reversing the decision of the Full Bench of the Bombay High Court has held that the crucial date for determining the liability to customs duty is the date on which the bill of entry in respect of the goods is presented under Section 46 and in the case of goods which are warehoused the relevant date would be the date on which the goods are actually removed from the warehouse. The counsel further submitted that based on the aforesaid decision of the Supreme Court the C.E.G.A.T itself has considered the question in Collector of Customs v. H.P.C. (2001) 130 ELT 139 and held that for the purpose of customs duty the basis that should be adopted is “dip measurement” in the shore tanks” as shown in the Cargo Intake Certificates attested by the Central Excise Authorities and not on the basis of the quantity reported in the Vessel’s ullage reports taken prior to actual unloading of goods. The counsel further submitted that this position has been accepted by the Ministry of Finance (Department of Revenue), Central Board of Customs and Excise, New Delhi in its circular No. 96/02 CUS dated 27.12.2002. The counsel on the basis of the said circular submits that the questions referred have thus become academic since the Board has already initiated action for withstanding pending matters. 4. Learned Counsel representing the senior Central Government standing counsel, on instructions, submits that the legal position laid down by the Supreme Court in Apar Pvt. Ltd.’s case and other cases as followed by the CEGAT in its orders dated 7.7.2000 and other cases has been accepted by the board and appropriate steps are being taken to withdraw the appeal filed by the Collector of Customs, Visakhapatanam now pending in the Supreme Court. The standing counsel then submits that though in paragraph 7 of the circular it is stated that pending provisional assessment may be finalised on the basis of the circular really the position stated in the circular applies to all matters pending in the courts also. 5. The question is as to whether the quantification of bulk liquid cargo for the purpose of assessment should be done on the basis of shore tank receipt, i.e., the dip measurement in tanks on shore in to which such cargo is pumped from the tanker or on the basis of the Ullage survey report obtained for the purpose of determining the liability of the master of the vessel under Sec. 116 of the Customs Act. There are conflicting views on this aspect. The CEGAT in its appellate order had noted the decisions of courts considering the questions regarding the correct criterion for determining the quantity on which duty is to be levied and observed that some decisions have taken the view that ullage survey report should be the decisive criterion but some other decisions took the view that the safe criterion is the shore tank measurement. The Tribunal has observed that what ever has been pumped out from the ship is to be taken to have reached the shore tanks and the preponderance of probability has therefore to be that the quantity which reached the shore tanks is the quantity which has actually been unloaded and therefore imported. The Tribunal observed that it would not be the intention of the legislature to have prescribed two independent sections in a manner that they could be interpreted to arrive at two different quantities of importation for these two purposes and that the two sections (Sections 12 and 116) have to be read harmoniously. It is observed that the method has to be the same for both the sections. The Tribunal ultimately relied on the Full Bench decision of the Bombay High Court in Apar Pvt.Ltd. (1985(22) ELT 644 as per which the import is complete as soon as the vessel enters the territorial waters of India. It was accordingly held that the ullage report is the primary and the Basic document available to determine the actual quantity imported. 6. It was accordingly held that the ullage report is the primary and the Basic document available to determine the actual quantity imported. 6. Now it is an admitted position that the Supreme Court has reversed the decision of the Full Bench of the Bombay High Court (vide Union of India v. Apar Pvt. Ltd. (1999(112) ELT 3). 7. The Government of India in the Ministry of Finance (Department of Revenue, Central Board of Excise and Customs, New Delhi in its circular No. 96/2002-Cus., dated 27.12.2002 issued directions in the matter of assessment of bulk liquid cargo. It was specifically noted therein that by circular No. 46 dated 17-5-2000 (2000 (118) ELT 64) directions were issued to the Customs Houses to finalise the provisional assessment relating to bulk liquid cargo imports on the basis of ullage survey reports and that pursuant to the Supreme Court order dated 20-2-2002 in Commissioner of Customs (Importer) Mumbai v. M/s. National Organic Chemical Industrial Ltd. (NOCIL) 2002 (142) ELT A 280 the matter has been re-examined by the Board. 8. The factual circumstances are stated thus: “To briefly recapitulate the facts, for quite some time now, a dispute has been going on between the oil companies and Customs regarding the quantity that needs to be taken for levy of customs duty on bulk liquid cargo. The dispute essentially relates to the method of determining the quantity. The contention of oil companies all along has been that the quantity of oil should be determined on the basis of ‘shore tank receipt’, i.e., dip measurement in tanks on shore into which oil is pumped from the tanker. The Department, on the contrary, has been of the view that the quantity of import should be determined on the basis of ullage survey report, i.e., the ullage quantity at the port of discharge determined on the basis of survey carried on board the vessel by independent surveyors in the presence of customs officers, master of the vessel and the consignee’s representative. The dispute has since been set at rest by the Supreme Court judgment dated 20-2-2002 in Civil Appeal No. 6764/1999(2002 (142) E.L.T. A280 (SC) in the case of Commissioner of Customs (Import), Mumbai v. m/s. NOCIL. The dispute has since been set at rest by the Supreme Court judgment dated 20-2-2002 in Civil Appeal No. 6764/1999(2002 (142) E.L.T. A280 (SC) in the case of Commissioner of Customs (Import), Mumbai v. m/s. NOCIL. In this order, the apex court has upheld the CEGAT orders in the case of M/s. HPCL and NOCIL, ruling that customs duty should be demanded on the quantity that is pumped into the shore tanks”. The legal position was summed up thus: “Now, with the pronouncement of Supreme Court judgment in the case of M/s. NOCIL referred to above, the controversy surrounding ‘ullage survey report’ v. ‘shore tank receipt’ has come to an end, and the final position which emerges is that the quantification of bulk liquid cargo for the purposes of assessment should be done on the basis of shore tank receipt, i.e., dip measurement in tanks on shore into which such cargo is pumped from the tanker”. 9. As already noted the Central Board of Excise and Customs has accepted the said position since this is the clear exposition of the legal position emerging from the decision of the Supreme Court. In these circumstances, we are of the view that the quantification of bulk liquid cargo for the purposes of assessment under the Customs Act should be on the basis of shore tank receipt, i.e., ‘dip measurement in the shore tanks’ as shown in the Cargo Intake Certificates. 10. In the light of the above, we answer question Nos. 1 and 2 in the negative, i.e. against the department and in favour of the applicant. Question Nos. 3 and 4 are covered by circular No. 96/02—Cus. Dated 27.12.2002 which has taken the view tha the principles applicable to Section 116 of the Customs Act would not apply to the assessment under Section 12 of the Customs Act, 1962. We accordingly answer question No.3 in the negative, i.e., against the department and in favour of the applicant. In the light of our answers to question Nos. 1 to 3 we do not think it necessary to answer question No.4. We accordingly decline to answer question No.4. These referred cases are disposed of as above.